Major Wins on Outreach and Rules for Struggling Borrowers; Other News
Win #1: Education Department Kicks Off IBR Outreach Campaign
This month the U.S. Department of Education launched a much-needed outreach campaign to tell struggling borrowers about IBR and related programs. Email messages are going to about 3.5 million borrowers showing signs of financial distress or carrying higher than average debt. Since IBR went live in 2009, TICAS has repeatedly called for just this kind of targeted outreach to help struggling borrowers lower their monthly payments and stay out of default. We're thrilled to see this part of President Obama's college affordability plan put into action, and we've suggested a couple of tweaks to make it easier for borrowers to respond.
Read our blog post on the new IBR outreach campaign.
Win #2: New Rules Strengthen Protections for Distressed Federal Loan Borrowers
Responding directly to public comments TICAS and others submitted this summer, the Department of Education has issued final regulations that strengthen some important protections for borrowers. In one key win, the final rules require that borrowers seeking to rehabilitate defaulted loans must first be offered a monthly payment amount based on what they would pay in IBR: no more than 15 percent of the borrower's discretionary income. This critical change will make it easier for borrowers to get out of default and repay their loans by ensuring that the payments required to rehabilitate a loan really are "reasonable and affordable" as required by law.
Concerns About "Pay It Forward"
TICAS has joined with national, state, and local student and education organizations to express concerns about the "Pay It Forward" concept, which has attracted the interest of lawmakers in a number of states. Proponents claim it offers students a debt-free degree by eliminating up-front tuition costs, instead requiring them to pay back a percentage of their income over a lengthy period of time after graduation. While well intentioned, we're concerned that "Pay It Forward" could shift college costs even further onto students, in large part by potentially accelerating state disinvestment from public colleges and need-based state grants. Instead, policymakers should support efforts that increase need-based student aid and state support for public institutions.
Read the statement.
CFPB Report Analyzes Private Education Loan Complaints
The Consumer Financial Protection Bureau's (CFPB) Student Loan Ombudsman released its second annual report, analyzing the 3,800 complaints it received from private loan borrowers over the last year. The report contained some troubling findings, driving home the importance of the CFPB's authority to oversee this market and protect borrowers. For example, some borrowers found that payments made in excess of their monthly minimum were not applied to the loan with the highest interest rate, but rather spread across all loans, undermining their attempts to reduce total loan costs.
Feeling thankful for IBR? Share your story!
With Thanksgiving around the corner, we're thankful for all the ways the IBRinfo community stands up for student loan borrowers.
If you're feeling thankful for IBR, your story can inspire others to see if IBR will help them, too. Have income-based payments helped you balance your budget, pay your rent, afford health care, or save for the future? We want to know!
Share your story here.